Worst may finally be over for Apple

Apple's stock is still well below its all-time peak, but a recent rally may be a sign the iPhone maker is soon set to fly high again.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

In like a lion and out like a lamb may apply to the weather in March, but not to Apple's stock.

Apple (AAPL) limped its way into the start of the month. Shares hit a 52-week low of $419 on March 4.

At that point, Apple's stock was more than 40% below the all-time high it hit in September.

But Apple has come roaring back in the past few weeks. The stock is now trading around $455, up nearly 10% from the March 4 low.

So is the worst over? And why have shares suddenly turned higher?

It's impossible to say just yet if Apple has truly bottomed. As much as I'd like to think that's the case, it will largely depend on whether Apple's earnings report next month -- and more importantly, its outlook -- satisfies investors.

But there are encouraging signs. One reason Apple may be rallying now is that investors may have been overreacting to concerns about competition from other makers of smartphones and tablets.

Samsung unveiled its new Galaxy S IV phone last week. The device is yet another strong entry in the camp of phones running on Google's (GOOG) Android operating system, but it seems silly to suggest that the latest Galaxy will be an iPhone killer.

Samsung's awkward (and some would argue, sexist) launch event may have also helped remind some investors that despite some occasional hiccups with things like the botched Maps app for iOS 6, Apple is still king when it comes to brand image and reputation.

BlackBerry's new Z10 is getting decent reviews. But let's get real. The best BlackBerry (BBRY) can probably hope for is being able to stay ahead of Microsoft (MSFT) and Nokia (NOK) in the smartphone market share race. It's not catching Apple or Android.

There are also growing expectations that Apple will soon reveal a plan to do something more productive with its $137 billion in cash. The likely bet is an increased dividend and/or a boost to its share buyback plan. In fact, it was a year ago today that CEO Tim Cook announced Apple's first dividend since 1995.

I wouldn't hold your breath for Apple to cave in to activist shareholder David Einhorn, though. Einhorn's plan for so-called iPrefs, a new class of shares that would pay higher dividends, is not something Apple's management favors. But even a tiny boost to Apple's common dividend could excite shareholders that are hungry for yield in this still low-rate environment.

Investors probably are also coming to the realization that Apple's stock is now absurdly cheap. It's trading for just 10 times fiscal 2013 earnings estimates.

Sure, analysts have been lowering their forecasts for this year and next due to concerns about a slowdown in demand for iPhones and iPads and worries that Apple does not have another new home-run iSomething in its pipeline. But the consensus earnings estimates for 2013 and 2014 are just 16% lower than where they were back in September. Not 40%.

So if you believe that stocks should follow earnings and that the current estimates are grounded in reality, Apple should only be about 16% below where it was in September. And that leaves you with a stock price of around $590 ... 30% above current levels.

Of course, $590 is not $705. Anyone that bought in September will probably have to wait a while (perhaps years) for Apple to ever get back to that price. For Apple to reclaim the $700 level, it will have to prove the skeptics wrong and show that the company can still innovate in the post-Steve Jobs era. That's the only way to get revenue and earnings estimates moving higher again.

The iPhone 5S or iPhone 6 might not be enough to convince anyone other than the Apple sycophants that the company is still on the cutting edge of technology. Neither would newer iPads, an iWatch or some sort of rumored online radio service. It might take the launch of the mythical (for now at least) iTV to do that.

But Apple investors can take solace in the fact that being down does not mean you are out as long as you can reinvent yourself. Just ask Google. That stock had an even bigger fall from grace than Apple a few years ago.

Google lost more than two-thirds of its value in a year, tumbling from a then all-time high of $747 in November 2007 to a low of $247.30 12 months later. Those were unique circumstances, obviously, given that it happened during the start of the Great Recession and the worst of the credit crisis that paralyzed the entire stock market.

But there were many investors in 2008 and early 2009 who probably felt that Google's best days were behind it. It was considered a one-trick pony. Flash forward four years, and that's clearly not the case. The stock hit a new all-time high this month of $844. That's because Google has successfully branched into new markets beyond its bread-and-butter business of search, most notably display ads through video site YouTube and of course, mobile via Android.

This is not to say that Apple will be able to pull off a comeback as stunning as Google's. It's certainly not going to happen overnight. But I wouldn't bet against Apple for the long haul.

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.